The FTSE 100 stock index tumbled to a three-month low on Thursday, erasing all of its 2023 gains.
In stark contrast, the price of Bitcoin (BTC) has doubled over the same period. The Armchair Trader remains long Bitcoin for the time being as it continues its upward trend.
While traditional assets struggle to see any growth at all, digital assets are proving to be a competitive alternative that investors can’t overlook.
“Although digital assets have had their own ups and downs, the recent performance of BTC suggests that it is now a serious contender as a source of returns during times of economic turmoil and inflation,” said Katharine Wooller, Business Unit Director at Coincover. “Unsurprisingly, there is increasing appetite from financial institutions, for example in the recent Blackrock ETF filing with the SEC, which is a symbol of and catalyst for further increasing confidence in the market.”
This also represents an interesting change in dynamic, Wooller thinks. “Until recently, crypto markets have mirrored traditional markets, rising and falling in tandem. But it’s beginning to look like those days are behind us as digital assets continue to see steady growth. And given that the crypto industry is fast maturing and finding ways to address inherent risks, such as those on security, it seems logical that BTC could be poised for another price surge as the market introduces infrastructure that will create more stability.”
Bitcoin futures challenging 2023 highs
Bitcoin futures are holding just below the year’s highs. After a deep correction lower from the initial YTD highs in April, the market has since recovered firmly and is now sitting in a holding pattern, looking poised for an imminent breakout. One of the key drivers behind the rally in BTC recently has been news of BlackRock applying to the SEC to launch a Bitcoin ETF. The support of a heavyweight financial name has strengthened retail conviction in the asset and ushered in a new wave of institutional interest.
Speaking this week, BlackRock CEO Larry Fink said that the fund management giant believes Bitcoin can “revolutionise finance” and offers a strong alternative to “investing in gold as a hedge against inflation.”
“With BlackRock throwing its support behind Bitcoin, the view held by bulls is that increased demand will help propel prices higher over the end of the year as the Fed eventually completes its projected tightening campaign,” said James Harte, an analyst with Tickmill.
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Traders are watching BTC in light of Fed action
With the Fed projecting a slower pace of tightening (only 1 or 2 more hikes planned), BTC traders are eyeing a shift in market dynamics which should help drive the next bull phase.
Amidst the noise, the digital assets industry is making progress, hence our own optimism here at The Armchair Trader. The collective market value of cryptocurrencies has seen a near 400% increase compared to pre-pandemic levels, developer activity has reached new heights, and global crypto ownership exceeds 425 million. In addition, institutional interest remains high.
Nicklas Nilsson, a consultant with GlobalData, which tracks crypto markets, says the crypto space continues to experience rapid innovation, from new token types to scalability solutions. However, he warns that regulation remains a critical issue, acting as a considerable barrier to broader crypto adoption. Many countries have sought to regulate crypto in some way, particularly in the wake of the 2022 crypto crash. Nonetheless, approaches differ widely.
Nilsson explains: “While the regulatory chaos in the US garners most attention, other jurisdictions are taking decisive steps towards providing much-needed clarity for the cryptocurrency industry. The EU leads the way with its Markets in Crypto-Assets (MiCA) bill, introducing tougher but consistent rules across member states by 2025. Additionally, the UK, Singapore, and Japan are actively developing their own crypto regulatory frameworks, reflecting the shift from calls of an outright ban to a regulation-focused approach.”